Your Trusted Business Investment Resources

5 Traps to Avoid When Buying a Franchise

If you are considering the prospect of buying into a franchise, there are a lot of factors that you are going to have to weigh before you start signing papers or applying for loans. You want to know exactly what you’re getting yourself into and how you are going to be able to handle it all. If this is your first time buying into a franchise business, you want to be extra careful. Not all franchises are created equal and you want to be sure that you don’t fall for any cons or pyramid schemes. In the world of business, it’s a dog-eat-dog world and no one has any sympathy for your ignorance. So you want to be the one who learns from the mistakes of others, rather than the other way around. There is a lot of work to do and you have a long road ahead of you, but just to get you started off, here are five traps to avoid when buying a franchise.

Insurmountable debt – if your franchisor requires you to come out of pocket on more than you can handle, then you’re never going to get out alive. You want to be sure to read all of the fine print on your contract and go over it with an accountant and lawyer. Getting a second and third opinion is essential before you actually take the plunge. A good contract is one where both parties feel as though everything is fair and reasonable.

Poor hiring practices – if you don’t have very stringent hiring criteria for all of the positions that need to be filled, then your employees could drive your business into the ground. Many people will say one thing in an interview because they are desperate for a job, but once you start signing their paychecks, they’ll become far more entitled and a lot less accountable.

No market – If the product you are selling doesn’t appeal to the community you are serving, then you could find yourself investing a ton of money into a dud. You can visit FranchiseExpo.com to learn what kind of franchise business your community is in need of.

Saturated market – If there are already a number of businesses within your community that offer the same product as you, then you will have a very hard time attracting a large customer base. You want to know exactly who your customer base is and what they are in need of. If it’s not a new hardware store, then you don’t want to buy into a hardware franchise.

Dead zone – let’s face it, some storefronts just can’t support a thriving business. You know the ones that seem to keep changing every year or two and remain vacant for years at a time? Those are the dead zones. These unfortunate locations for some mysterious reason just can’t support a thriving business. So be sure to do your research before you start leasing space.